Required: 1. What amount related to the lease would IC report in its balance sheet at December 31, 2021 (ignore taxes)? 2. What amount related to the lease would IC report in its income statement for the year ended December 31, 2021 (ignore taxes)?

Given,

On June 30, 2021, Georgia-Atlantic, Inc. Leased warehouse equipment from IC leasing Corporation.

The lease agreement calls for Georgia -Atlantic to make semiannual lease payments of $562,907 over a three-year lease term (also the asset's useful life).

Working note:-1):

Compute the present value of the lease amount of $562,907

Use the present value factor 5.32948 (Present value of annuity of $1 for 6 periods at 5% rate)

Present value (Initial balance) = $562,907*5.32948 = $3,00,000

Working Note:-2):

Interest revenue of lease on December 31, 2021:

Interest revenue = 5%($3,00,000-$562,907)

                           = $121,855

Working Note:-3):

Lease (Reduction on December 31, 2018) = Lease amount - Interest receivables

= $562,907 - $121,855 = $441,052